Fink’s 2003 Recap

In his year-end letter to member firms, Matthew P. Fink, the president of the Investment Company Institute called for severe sanctions against those who willfully acted against the interests of shareholders, but warned against misguided fixes to the industry that may end up increasing costs and diminishing returns.

"The law enforcement message must be loud, tough, clear and measurable. Fund shareholders who were harmed must be made right," Fink wrote in his letter. "Strong and effective regulatory reforms must be put in place to ensure that these and similar abuses never happen again."

Fink said that in the coming year the industry will have to make decisions that will have an impact on shareholders for decades to come. "Some of our work will involve addressing proposals that purport to respond to problems, but, as Treasury Secretary Snow and Federal Reserve Chairman Greenspan warned last month, serve mainly to increase costs and decrease returns. The larger challenge in 2004 will be to advocate measures that are needed to restore investor confidence and rebuild public trust."

Fink noted that the ICI has already called for a minimum mandatory 2% redemption fee on all short-term trades to curb market timing and is in favor of a strict 4 p.m. deadline for orders to be received by fund companies. These measures would effectively slam the door on late trading, he said. The ICI has also urged advisers to clarify their codes of ethics in relation to personal trading by fund personnel.

The ICI has asked the SEC to significantly limit the products and services that investment advisers can acquire with commissions in relation to soft-dollar arrangements. A narrower definition will help eliminate potential conflicts, Fink wrote. Additionally, the trade group suggested the total abolition of "directed brokerage," a quid pro quo practice in which fund managers direct brokerage transactions to reward firms that sell the managers funds.

Fink also took an apparent shot at New York Attorney General Eliot Spitzer and Massachusetts Secretary of the Commonwealth William Galvin, saying that in the coming year the "SEC must be provided with the resources necessary to fulfill its mission to protect investors and to maintain its position as the nations preeminent regulator of mutual funds."